thursday update

SHORT TERM: pullback/correction continues, DOW -104

Overnight the Asian markets dropped 0.9%. Europe opened lower and lost 0.7%. US index futures were lower overnight. At 8:30 weekly Jobless claims were reported higher: 368k v 298k, Retail sales were reported higher: +0.7% v +0.4%, Export prices were higher: +0.1% v -0.4%, but Import prices were flat: 0.0% v 0.0%. The market opened flat at SPX 1780, bounced to 1783, then made lower lows. At 10:00 Business inventories were reported higher: +0.7% v +0.6%. By 10:30 the SPX had hit 1776. It then bounced to SPX 1781, but rolled over again hitting 1772 by 12:30. After that it started to rally. The rally lasted until 3pm when the SPX hit 1783. Then a pullback into the close ended the day at SPX 1776.

For the day the SPX/DOW were -0.50%, and the NDX/NAZ were -0.20%. Bonds lost 10 ticks, Crude was flat, Gold dropped $25, and the USD was higher. Medium term support drops to the 1699 and 1680 pivots, with resistance at the 1779 and 1828 pivots. Tomorrow: the PPI at 8:30.

The market opened flat, bounced, and then broke below SPX 1775 on its way to 1772. This was an important move, in that SPX 1775 was the high of the previous third wave. Recall from the August low, in the SPX, what have counted five waves: 1730-1676-1775-1746-1814. The drop today below 1775 creates an overlap, suggesting that the five waves have completed. In the DOW we have a similar count, but from the October low. It now appears, as suspected, either Int. one of Major 5 or Int. five of Major 5 ended at SPX 1814. Normally we would be expecting a downtrend to be underway. But in recent months this trifurcated market has been anything but normal. Should the SPX continue lower and drop below 1746, there is a good chance we will get a downtrend confirmation.

Short term support drops to SPX 1746 and SPX 1730, with resistance now at the 1779 pivot and SPX 1814. Short term momentum bounced from extremely oversold to neutral, during the rally, then headed lower. Short term OEW charts remain negative with reversal level now SPX 1791. Best to your trading!

MEDIUM TERM: uptrend weakening

LONG TERM: bull market


About tony caldaro

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95 Responses to thursday update

  1. budfox9450 says:

    ref DSX – trying to understand why the stock
    I own is up. The recent court rulling, was what
    “no big deal” ??? Going with the technicals

    • tony caldaro says:

      what court ruling? the one regarding the $1mn?
      Morgan Stanley upgraded the whole group today.
      They expect shipping rates to continue to rise for another two years.
      Guess they read our sunday report =)

      • budfox9450 says:

        Tony, this is what I saw, and was not clear
        on it vs. the MS announcement. BTW – anymore
        morsels in your treasure chest your looking at? Bud
        Diana Shipping Inc. Announces Results of Hearing Involving the M/V Thetis ATHENS, Greece, Dec. 5, 2013 (GLOBE NEWSWIRE) — Diana Shipping Inc. (NYSE:DSX), (the “Company”), today announced that its subsidiary, Diana Shipping Services S.A. (“DSS”), was sentenced by the United States District Court in Norfolk, Virginia to a fine of $1,100,000 and a period of probation of three years and six months as a result of a conviction earlier this year by which DSS was held vicariously liable for the illegal acts of the M/V Thetis’s Chief Engineer and 2(nd) Engineer who were found guilty by the Court of violating several U.S. statutes and regulations in failing to properly handle bilge wastes, maintain required records and for obstruction of justice

      • budfox9450 says:

        I”ll send you this Sunday, too. Should
        be an interesting, as well as last Sunday.
        Good work Mr. C…

  2. waddaguess says:

    Above 1786 my horns emerge.

  3. 777daimon says:

    yo people,
    Bernanke makes today 60 years! 🙂
    Sing a Happy Birthday tune! 🙂

  4. + div on daily RSI(5) on DOW between yesterday’s lower low (15703) and last weeks low (15791) …!!!???

    • bobhopium says:

      Yes Indeed + other bullish technicals…Get ready for the mother of all short closing rallys….Coming soon to a screen near you.

  5. mjtplayer says:

    Exactly the type of action one would expect to see in a downtrend. No rally, just trading sideways to work-off the oversold conditions before the next leg down to the 1,740 – 1,750 area. Another day or 2 of sideways action and the short-term oscilators will be back to neutral too.

    Regarding the Fed, will they taper next week? Probably not. That said, everybody expected the taper in Sept and we didn’t get it. Be careful of the “consensus”.

    Put yourself in the shoes of a portfolio manager, sitting on huge gains YTD. Do you sell now and lock-in the gains or do you hang-on and hope for the year-end rally that everyone is expecting?

    Current consunsus: nobody is expecting the taper next week, everyone is expecting a year-end rally. Which means either one or both won’t happen since these outcomes are already expected and therefore priced-in.

    • Thomas Crown says:

      It’s difficult to put oneself in the shoes of a money manager.
      These people are not rational, for the great majority they act following a herd instinct .
      Anybody in their sane mind would take their profit now and not risk facing a correction, perhaps even the end of a bull move, just to catch the few percentage points left to be taken on the upside if any.
      If one follows Tony’s road map, it’s even more of a no brainer. Facing a possible 10% P4 correction, to then rebound in a P5 that might even truncate or at best take you back 2 or 3% higher than where we were a few days ago, is greedy and stupid.
      As for the consensus, more an more people are expecting a light taper in December. And we might just get it together with the YE rally.

  6. Ryan Parker says:

    Does anyone actually believe that the Fed will taper next week?

    • uncle10 says:

      Does anyone actually think it matters?

      • no I think there is zero chance the FED tapers next week. And I do think it matters since this is a liquidity drivern rally. I think the market will force the fed into doing what they want.

      • uncle10 says:

        The Fed buys bonds not stocks. The bond market is so big it makes the Fed look like a zit on a butt. Taper no taper—- it makes no difference. Its possible the market and or economy has actually been hurt by QE 2/3/.

    • I don’t think it matters, but since Senate will start the debate on Tuesday, one must guess that Fed will not have time to decide on tapering?

    • With the help of TWOSIDED who pointed out the VIX curve is flat for the next few months I believe nobody expects a taper till march. otherwise Volatilty would be higher for the fear of the unknown of what would happed, I believe Klout posted a great piece and I dont know where he got it from where he said on days where the FED pumped 5 billion the S&P is up 570 points. less than 5 billion 141 points thats over 700 points and on days when the do zero its downs like 51 points. Great work by alot of people on this blog

    • jmoptions says:

      I do, predict taper of 15B.
      Fed may also stop paying 0.25% for banks to park their reserves.

    • uncle10 says:

      Hey Ryan, no I don’t think they will taper. That would be a nice parting gift by uncle Ben though.
      Have a good weekend everyone.

    • scf51 says:

      That’s the whole point of “tapering.” It’s begins with the first opportunity and that is now.

    • buddyglove says:

      Taper Snaiper ! … Enough with the taper nonsense already ! 🙂

  7. pcskier says:

    A lower low on the daily should open the flood gate.

  8. ko68 says:

    Thanks Tony
    Wave A still in progress?

  9. jmoptions says:

    A wave down done, b wave up now to 1787 area at least. Refresh shorts at that area again. This would be minor b then.

  10. 777daimon says:

    I expect more downside although I’ve seen an opinion of another blogger that the market could transform the actual H&S on 4h chart spx 500 into an IH&S (now being into the “head”) and expecting a ramp up to 1810-1814 (IH&S neckline) .
    But I think he’s crazy and this is truly impossible in only one day.
    More downside today expected before FOMC meeting next week.

    • RDC says:

      Next week, another uncertainty will be out of the way, markets will respond positively and surge higher.

      • pooch77 says:

        I believe no taper, and I believe they sign budget Mon-Tue which should be very bullish for end of year

      • pcskier says:

        My call for next week, taper 10 to 20 billion per month, or no taper but will call hard end date for QE; june 2014 to complete 1.5 trillion in total purchases.

      • 777daimon says:

        no taper this year or next year.
        Bernanke (and Yellen) would repeat the mistake of tapering too soon – already done by FED in XX century after the ’30’s crysis.
        They won’t repeat the same mistake again – this is true!

    • ewtoriginal says:

      It is probably difficult to find any bullish bloggers these days so I would trust his opinion,which has been yours as well so stick with it. I dont think this blog has its moderator zealously stating his opinion.He reserves that for us. Tony merely imparts his interpretation based upon fulfillment of wave structure based on the rules.Thats why he doesnt commit to a change until a rule would be violated such as the breaking beneath the peak of third. Contributing readers bring insights into other factors which may be useful to others.
      This market is unusual because evidence indicates that QE may have been one of,if not the primary, influence on prices. Whether or not easy money and liquidity change and the reaction of markets is anyones guess right now.It is still a bull market. The alleged low participation by retail(which I do not believe), the record high margin balances,record sentiment,the effect of Volcker Rule restrictions on banks prop trading, etc and the current length and record high prices in the market certainly could indicate a danger zone is imminent if not already begun.Oh yeah, Cramer is super bullish too.Surprise.
      But nothing would shock me either way.I’ve already been shocked.

  11. $SPX $SPY $UVXY $TSLA $DRN $NUGT market update and trades for friday (within remarks’ sect.):

  12. torehund says:

    Funny thing in the market, if one tries to avoid a bubble to grow bigger all the efforts you put in is only further exaggerating the bubble. Norwegian government is attempting to curb prices and make it more difficult to get loans and you need more capital to even get a loan. That prevents the bubble from popping and drives it further into a monster bubble. As in life as in markets, always bet against your gut and what you expect of adverse moments will never happen, never as you already insures yourself against them. Thats why it takes a black sway on a sunny day to bring market down…

  13. fishonhook says:

    This is the market or rather Wall street telling the Fed…do not even consider tapering!

    • torehund says:

      ….think the market has to taper itself, if economy is strong enough, rates will rise but that isn’t the case yet. Look at BDI its doubled, but still laughable and not a sign economy is coming back strongly. What has gone up and masks the indexes is just the “fluff”, social media and telephonemaker Apple. That isn’t a strong economy by itself.

  14. hucky2 says:

    If minute c up is next it should reach at least 1787 – .382 retracement of the 1811 to 1772
    support/C target at 1760 the 50ma & then Tony’s 1746

  15. Is FED tapering bond buying program next week? My 2 cents

    China Index….

    20 Year bond index (TLT)

    China alternate count – Small tapering by FED. Initial reaction to downwards and then resume up wards…..

  16. valunvstr says:

    Anyone thinks this is a “major” correction or top needs to stop drinking. Small correction. Then higher prices. It is R of T of Q of 1 of 5.

    • torehund says:

      value, I am sitting in this market and probably sharing feelings with many out there; it hurts mentally to be long here. Today there was some stocks starting to squeeze and some had opposite small waterfall declines on SMALL VOLUME. This light market, and the world economy all of a sudden turning up further will give the mother of all rallies, and contrary if it turns down as many expect. Its a pain trade and usually if pays of.

    • rc1269 says:

      i love when i can ready those who predict the future with certainty
      almost makes me want to stop drinking. almost

      • ewtoriginal says:

        I’ll drink to that

      • valunvstr says:

        Actually, I can’t predict the future with certainty. That’s why I’ve been 100% long the broad market etfs all year. Unlike, everyone on this board an around the country who have been trying to “figure this market out”. And investors wonder why they chronically underperform the market. It’s either performance chasing hot funds or trying to time markets. Both don’t work.

        A hedge every know and again might make sense to protect profits but an investor be darn accurate because puts are all about timing.

      • hucky2 says:

        valunvetr – I sell options with a 90% probability of expiring worthless, consistently earning me 4% to 6% per week. The deal I have on at he moment actually has 87% probability of earning me 6.4% by opex on Friday (not perfect but close)

    • mcmasoniam says:

      Shame on you, vvstr! I completely disagree!!!! They should drink more…
      GL All! M

  17. valunvstr says:

    Go the break of the Head and Shoulders and throwback to 1780 today. On to 1747ish. Then probably higher priced in Q1.

  18. pcskier says:

    One of the indicators i follow that comes out after close gave me sell $vix buy $spx tonight. Maybe bounce tomorrow.

  19. M1 says:

    Tony, are your counting suggesting major wave a of primary IV is around the corner ?
    only 41 points for a major wave ?

  20. Thanks Tony. Looking at the action in KRE, XLF and XLE, I think Int. one of Major 5 ended at 1814. We will know in couple of days. If not ready to load up leveraged EFT PUT options. Also as the market is going lower DRYS slowly creeping higher, not a major move but worth watching this stock for coming weeks and months to come.

    • Hi Peter, are you familiar with EGLE at all? Looks to me like they are headed for bankruptcy but the stock is still $3.00. I know $BDI is rising but it looks too little too late for that one. Stock will eventually go to zero. Interesting to see how the dry bulkers are being winnowed out into the winners and losers. Free market at it’s best, and less shippers means rates will keep rising. I’ve noticed that bankruptcy announcements lead to an ABC pattern in the stocks after the news. A fast A down, way down, then a strong B bounce, sometimes all the way to the initial breakdown level where the news was announced, then a C wave down to…oblivion. Stock might trade on the pinks for a long time first. Anyhow, might be an interesting $BDI play, long a strong player like NM and also short a dog like EGLE. Might make a great options pair.

      • torehund says:

        Twosided, the banks needs the index up and many bulkers to get into the green to avoid taking massive losses so the infuse capital do secondaries etc. This prolongs the pain but maybe the banks know what they are doing ? If they had not done this respiratorial emergency efforts and BK-ed the many debt laden companies, world economy might have picked up much sooner. Investors have paid handsomely through the years by participating in R-splits and secondaries sparing the banks from taking all the pain that they should have endured all by themselves.

      • Hello Twosided, I am not aware of those stocks. But if you ask EWI folks they will say that all these stocks are in a bear market rally because they don’t have impulsive bullish look (five waves up with no overlapping waves). But for short term as a trader your strategy may work great. GL with your trading.

  21. torehund says:

    Seeing some capitulation also today, as I have been seeing for the last weeks, flatlining and then MM finds it tempting to drop some shares. If this continues it could get ugly, if it contains itself its good and if we get a squeeze higher, and that would be normal too. As the bull reaches max the teeth vill get longer and not like “the molars” that we have seen so far. Glass looks half empty with oil in the doldrums, please santa don’t deserve us.

  22. I call on Soulsurferusa to save his excellent post of Wed Dec 11 in which he outlined the possible path of Primary 4 and repost it if and when we get a Primary 4 confirmation.

  23. thanks tony; with one count being eliminated, it sure makes life a little easier. IF tomorrow is a strong up day, then that would seal a + div on the daily RSI5, and may suggest the alt. count of a subdividing 5th wave. Took profits on my SDS’ (one can never be too careful shorting a bull), and waiting for the smoke to clear; either an abc up from the 1772 low, with a to 1782, b to 1775 and now c to follow… or first a new low to complete major a, where 1782 was minor b? Kinda the two most likely odds I am eyeing. either way should be profitable

      • thanks tony; especially with being late to the (downside) party y’day due to that pesky “no cellphone coverage” I was extra careful and took profits at about 1775… not shabby imho… if i may say so myself

    • Are you talking about the beginning of a Primary 4 scenario here or did you mean “Int a” where you wrote “Major a”, which would imply you are referring to an Int 2 wave of Major 5? That would suggest that you consider the entire move from 1814 to 1772 so far to be a Minor A of a possible Int wave 2 where C ends below 1772. If Wave 2 is complete, we already have an A-B-C in the form 1814-1779-1772.

      “either an abc up from the 1772 low, with a to 1782, b to 1775 and now c to follow… or first a new low to complete major a, where 1782 was minor b? Kinda the two most likely odds I am eyeing. either way should be profitable”

      • Correction to “did you mean Int a where you wrote Major a ?”: I should have written “did you mean Int wave 2?”. It would really be nice if WordPress provided an edit function. I have now used up my allotment of 3 daily posts, one of which is for a correction of the previous post.

      • george; i am not counting my posts for now 😉 but if an abc pattern up from the 1772 would commence and would be followed by new lows; then 1772 would be minor a of intermediate c of major a. That abc pattern up would be 3 minute waves (minute a from 1772 to 1782, minute b to 1775, minute c to ???) to completed minor b, and the subsequent c wave down to follow to new lows would be minor c of intermediate c of major a. I would expect -in this case- major a to hit the 50d sma; and it would take 2-3 days to complete.

    • SSUSA:
      Thank you for going into further detail. I can now infer that you are describing the beginning of a Primary 4 scenario. However, it would make it a lot easier to understand if you actually stated that before you described the Major, Int, Minor and Minute waves. Then the context of your prognostications would then be instantly clear. Your Wed Dec. 11 post was a model of clarity because you provided the overview and then filled in the details in a kind of top-down description. And I think that kind of clarity can be achieved without necessarily writing a long post.

  24. mharrison60 says:

    Tony, thanks for the update.

  25. ewtoriginal says:

    Thanks Tony. I am looking at two maximum short term targets of 1745 or 1710 before a material bounce occurs..likely the Santa rally from 1710 back to 1746. It is understandably ambition and overwhelmingly bearish given the seasonal factors and the structure, but the sentiment extreme is hard to dismiss. The recent closes indicate change in personality through downside rate of change, rarely seen for months.
    I think talking heads still see minimal downside and that dismisses many arguments that the market has been frothy. That debate will rage until retrospect proves which school of thought had it right.

  26. mcmasoniam says:

    Thank you, Tony. This is where it really begins to get interesting! GL to All. M

  27. bouraq says:

    Bears getting excited

  28. attitude928 says:

    Maybe we never had Christmas rallies. Chanukah was a month early this year. More down to come.

  29. Caldaro just one quick question. are you saying in a normal market this should have been enough to confirm a downtrend but with the fed pumping your apprehensive to do so until we confirm 1746? Also never seen a VIX curve so flat and even with futures going months out. 2 ways to look at it in my opinion complacency rains supreme or people are expecting that Christmas rally and this was the profit taking dip

    • tony caldaro says:

      No did not imply that.
      In a normal market the SPX/DOW generally move in tandem.
      In this market, since August, the SPX, and NDX/NAZ for that matter, have separated from the DOW.
      Has nothing to do with the FED: during QE’s 1 and 2 the indices reacted normally.
      The VIX measures volatility, VIX futures implied volatility.
      If there isn’t any, nor any expected, the VIX will remain quiet.
      Many focus on the FED and QE 3. They ignore the fact we had corrections, some deep, during QE 1, 2 and 3.

    • Hi Truth, I traded VIX related instruments pretty much exclusively for about a year or so. My observations was the flattening of the VIX futures going out several months was the only reliable VIX tell that a major correction was coming. When the first 3 months are elevated over the following months then a significant correction has arrived. I did a lot of back testing research with someone on another site back in 2010 and it was pretty reliable. The flattening of the curve comes first, then the front months spike. That, by the way, is the only time it’s ever worth buying a product like VXX because monthly roll is working in it’s favor for a sustained period. Also, it’s a bad bet to buy VXX puts after a big correction expecting a fall. They behave differently from other puts because when volatility falls their premium falls with it, blunting gains from the drop. Was the most infuriating thing I’ve ever traded. lol. Best wishes!

      • Twoside thanks for explanation. so in other words its better to purchase VXX at a time like this?

      • Probably not just yet. I found it was best to wait for the signal, the front 3 months above the rest, and not to anticipate it because if the futures go to that pattern they are telling us the big traders think the elevated VIX will be going on for quite awhile, and VXX is all about the roll cost between the front 2 months. If only the front month is above the 2nd month then it’s probably a quick correction. If the 2nd month is above the third it’s likely to be much bigger. Honestly it’s the only reliable tell I ever found as far as the predictive power of anything related to the VIX. I still check on it during corrections and it seems to still be valid, though if it gets widely noticed that could eventually change of course.

        I’m not sure I would recommend VXX to anyone honestly. It’s worth buying about once every year or so. It’s just not worth trying to pick that moment in my opinion. On the other hand, check out the etn XIV after the VIX has had a solid spike. VXX in reverse essentially. Just wait for the elevated VIX, buy the dip, and let it do it’s thing. If it gets to it’s lower weekly Bollinger Band I will certainly buy it some time shortly thereafter. IMO that’s the better play on VIX spikes.

  30. Lee says:

    Thanks Tony
    Bots r getting a workout

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